-Use the figure above to answer this question.Consider a perfectly competitive firm in a short run equilibrium.Figure ________ shows a firm in bad times because the firm makes a(n)________.
A) A; economic loss of $4 per unit if the firm decides to operate
B) A; economic loss of $4 so it must close
C) B; economic loss of $3 per unit
D) B; economic profit because the price exceeds average variable cost
E) C; normal profit and can stay open in the long run

Question

-Use the figure above to answer this question.Consider a perfectly competitive firm in a short run equilibrium.Figure ________ shows a firm in bad times because the firm makes a(n)________.
A) A; economic loss of $4 per unit if the firm decides to operate 
B) A; economic loss of $4 so it must close 
C) B; economic loss of $3 per unit 
D) B; economic profit because the price exceeds average variable cost 
E) C; normal profit and can stay open in the long run

Quizplus · Accepted Answer

The firm is in a short-run equilibrium, which means that it is producing the quantity of output where marginal cost equals marginal revenue. However, the firm is making an economic loss, which means that the price of the output is below the average total cost of production. In this case, the firm is making an economic loss of $4 per unit.

-Use the Figure Above to Answer This Question